What are the main problems in China that can derail its economic Essay - 1

What are the main problems in China that can derail its economic growth - Essay Example The exports of China have reduced significantly in the recent years. In March 2012, the Chinese government declared that the Chinese economy and its gross domestic product (GDP) are expected to grow at a slower rate of around 7.5% during the year 2012. The slowdown in the rate of economic growth in China had an adverse impact on the overall condition of the global economy. This is so because China is responsible for around 20 percent of the total economic output of the world. Besides, many Asian countries are also highly dependent on the Chinese economy and its market conditions (Hart, 2012). It would be a daunting task for most of the multinational corporations engaged in the manufacturing industrial sector to register significant profits if the Chinese economic growth rate slows down. The Central Bank of China has already started taking steps through reduction in the interest rates to help the economic recovery process of China and boost the lending process in the country. This ste p was taken up by the Chinese Central Bank to protect the country’s economy from the adverse effect of ongoing financial crisis situation in the European nations. The eminent economists worldwide suggest that capital infusion would not be able to solve these growth issues of the Chinese economy in an effective manner. It is so because with the increase in funds being pumped into the economy by the Chinese government would ultimately lead to increased consumer costs and inflation. Previously it was projected that China would experience a robust economic growth in the future but there are many barriers in the path of the economic development of the country. Some of those barriers include bureaucracy, shortage in energy, reducing levels of export because of decreasing demand of Chinese manufactured products in some of the major markets like UK and USA, social unrest in the country, increase in aging Chinese population, and so on. According to a report published by BBC News in th e month of July 2012, China experienced a slowdown in its economic growth rate to around 7.6 percent. This study entails about discussing and analysing the various negative effects that certain economic factors are having on the Chinese economic growth at present and in the foreseeable future. China contributes significantly towards the overall growth of the world economy. Hence, unstable and unsustainable Chinese economy is having a significant impact in deterring the global economic condition. This study would try to shed light on some of the major problems faced by China which can be responsible for slowing down the economic growth rate of the nation in the forthcoming years. Five such major factors have been discussed in details in this study. They are : a) International trade and exports by China, b) Problems related to Chinese currency and the foreign exchange regulations prevalent in the country, c) Problems associated with the increasing aging population of the country, d) T he rising levels of income inequality within the country, and e) The present bad conditions of the Chinese banking industry. All these five reasons can hinder the path of economic development of China in a significant manner. The central idea of this study is